LUNA: Identifying the Right Opportunity Before a 45% Probable Rally

A look at the price of LUNA, as it went to press, indicated that a short-term pullback would be necessary for a huge surge. This fact can be supported by technical and on-chain statistics and will serve as an opportunity for outside buyers to collect LUNA.

A perfect blend of technical and on-chain stats

The price of the altcoin saw it range from $43.34 to $87.92 as it crashed by about 50% between January 15 and 22. After establishing a stable base, LUNA rose 74% and broke the four-hour demand zone, which stretched from $75.57 to $79.40. As a result of the blockage, the price of the alt set a swing high of $79.52.

Interestingly, between January 15 and February 26, LUNA set lower highs while the Relative Strength Index (RSI) created a higher high. This setup is a bearish divergence and predicts that a retracement is likely. Due to the blockage and bearish divergence, the resulting price action will be a retracement dragging LUNA to another stable support level.

The contenders for such a barrier include the 50% retracement level at $65.63 and the 70.5% retracement level at $56.49. While the cryptocurrency may move lower, the bullish thesis will remain intact as long as the altcoin remains within the formed range.

A reversal at the levels mentioned above will trigger a strong uptrend, one that cuts through the said demand zone and marks the range high at $87.92.

Source: LUNA/USDT on TradingView

Here is the support system

The near term retracement is supported by the recent decline in Terra’s funding rate from 0.01% to -0.04%. This sudden dip indicates that investors are making gains and that the majority of traders are betting on a retracement.

Source: Saniment

While the short-term outlook may appear bearish, it is an opportunity for sideline buyers as the overall trend is still bullish. A similar outlook for the altcoin is the recent spike in on-chain volume from 881.73 million to 6.14 billion February 19-24. This massive gain has pushed well past the 200-day moving average, indicating that high net worth investors are interested in LUNA at current price levels.

Source: Saniment

While the situation looks optimistic for LUNA, market participants should pay close attention to the ongoing retracement. If this retracement moves below the 79% retracement level of $52.7 it will reveal that the bulls are weakening. However, a swing low below $43.34 invalidates the bullish thesis.

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